The inflation that was seen from 2021 into 2024 was higher than any person under 40 has ever seen in the United States. Prices soared. Money was printed (or digitally legered) endlessly for handouts. Post-covid aid was extended well beyond what was necessary. Wages soared. The cost of benefits soared. Commodity prices surged. Supply chain issues came into play. War came into play. And corporate profits hit records in many industries.

When you add it all up, inflation’s blame has to be mainly be that “corporate greed and price gouging!” Not so fast. The reality is that argument is a false flag narrative.

With a Presidential debate on the schedule and the election just two weeks away, there is a lot of shifting about what caused inflation. And then there is the real debate how to fight future inflation.

One critical aspect of what drives inflation at the consumer level is the price of food. You may want a new shirt or a new gizmo for your house. And you may want to go pay for a service. But without food (and water) you won’t be doing any of those other things.

Tactical Bulls reviewed a New York Federal Reserve report on the sharp rise in food prices up through 2024 and while you can find price hikes from major food retailers as part of the blame, it pales in comparison to issues like commodity prices and wages’ roles in inflation. And if this is true regarding groceries, it’s true in many other industries and retail sectors as well.

According to the New York Federal Reserve’s ‘What Was Up with Grocery Prices?’ by economic research advisor Thomas Klitgaard, rising corporate profit margins aren’t really the real culprit in the food inflation blame game. The report was from July, and Biden hadn’t even been pushed out of the race.

While Klitgaard did acknowledge that margins have gone up in food and beverage retailers from 2.9% in 2019 to 4.4% in 2023, this was really the equivalent of about $10 billion of the total $100 billion increase in revenues. He pointed out the two main culprits as much higher agricultural and livestock prices and much higher wages.

Going back to 2005, the Fed’s report says that grocery prices really respond noticeably only when commodity prices make big moves. It points to 2008, again in 2011 and a collapse in 2015. Many other input costs force the direction in grocery prices.

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The New York Fed’s report signaled that higher wage increases for grocery workers relative to other workers played a significant role in the food inflation blame game. Grocery store workers’ wages are shown to have risen 15 percentage points more than wages in the entire workforce as a whole since 2019. And that may not be over. That wage hike still has food industry wages about $13 less per hour of work than the average job in the private sector. In 2024, the “significant moderation in food inflation” was a balance of falling commodity prices while wages were still rising.

The consumer price index for food-at-home has undeniably been a significant source of pain for consumers. The Fed’s report showed the at-home food index was basically flat for five years ahead of the pandemic. Unfortunately, the damage is done as the (food-at-home) index rose a sharp 25% from Q4-2019 through Q4-2023. This was broken down as follows:

• up 4 percent in 2020;
• up 6% in 2021;
• and up 12% in 2022.

The Fed’s report also showed that the 25% gain was higher than the core goods index and the core services index with gains of 15% during the same periods. As far as wages impacting food-at-home inflation in 2024 (or in 2025), that remains to be seen. The Fed’s report said:

An open question is whether grocery inflation can stay as moderate as it has been since early 2023 with grocery worker wage inflation still elevated. Specifically, food manufacturing wages rose 4 percent and grocery workers’ wages rose 6 percent year-over-year in May 2024, while the food-at-home index rose by 1 percent.

And while the report does outline how $10 billion of the $100 billion increase in time was tied to gains in operating income, the Fed’s report really puts the big food inflation blame game on commodity prices and wages. It concluded:

Putting these factors together suggests that the unusually high food inflation experienced in the first three years of the pandemic appears to have been due, in part, to much higher food commodity prices and large increases in wages for grocery store workers.

And for the mystery about what food-at-home inflation will look like in 2024:

The subsequent drop in commodity prices then helped bring food inflation down below the core inflation rate even though heightened wage pressure for grocery workers continued. In the end, the moderation of food price inflation has caused the gap that developed between the food index and the core index since the start of the pandemic to shrink from 10 percentage points at the end of 2022 to 5 percentage points in June 2024.

As for war, the inflationary pressure had already started before Russia’s invasion of Ukraine. That invasion did disrupt fertilizer supplies and wheat supplies simultaneously, which added fuel on an already-burning fire (the title “The Wheat Basket of Europe” holds true for Ukraine). And the October (2023) attacks by Hamas in Israel have had no underlying effects on international commodity prices around the globe other than shipping prices around the nearby nations.

Before we just scream “price gouging” and “corporate greed” we need to keep in mind that if a business doesn’t make a certain margin then it should just invest the money rather than operate. If a company could just invest to earn 5%, why deal with regulations, operating costs, labor relations, and even thieves?

Please understand one thing about prices charged by businesses outside of economic turmoil — commodity prices can fluctuate, but wages and prices paid by consumers are generally a one-way ticket up. Even if the rise is small, there are very few instances of prolonged disinflation where prices drop month after month.

A price-gouging ban may sound fine on the surface. After all, none of us would say “I am pro-price gouging!” The problem is that price gouging is a false flag that doesn’t address the trillions of dollars pumped into the system since 2020 and it doesn’t address endless wage pressures up until recently. Going a step further beyond just policing prices is actual price controls similar to what has been seen under socialist and communist regimes. Regardless of anyone’s political leanings in America, the actual history and track records of those economics is not a pretty track record.